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EVP & CFO Vincent Chao explained the bad debt forecast is a prudent measure to maintain 'dry powder' for the unresolved At Home bankruptcy and normal course turnover. President and CEO Stephen Horn added that the pricing spread for portfolios has widened, with some larger portfolios trading at a premium due to new capital entering the space.

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Chief Investment Officer Matthew Birenbaum explained that while overall leasing velocity remains strong at around 30 homes per month, one urban Denver project faced elevated concessions in a competitive submarket. He and COO Sean Breslin expressed confidence in catching up by year-end, citing strong performance in newly opened lease-ups in markets like South Miami and Northern New Jersey.

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SVP & COO Michael Lacy explained that the guidance raise is based on strong execution to date, with first-half blended rent growth exceeding the high end of the original guide. He noted that while market rents have been more muted recently, leading to a revised back-half outlook with renewal growth around 4-4.5%, the strong first-half performance provides a buffer. He also confirmed the spread between coastal and Sunbelt markets is narrowing as expected, from a 450 basis point gap in Q1 to around 400 basis points in Q2.

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CEO John Kite stated that leasing activity has picked up substantially, with no signs of indecisiveness from tenants. President & COO Tom McGowan added that cooperation between landlords and tenants has improved to expedite store openings. Regarding escalators, John Kite pointed to the company's results, including 3.4% embedded growth in the first half of the year, as proof of their success, noting it's a key focus.

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EVP & CFO Mike Mas clarified that the Q2 recovery rate was boosted by a one-time, approximately $1 million benefit from the annual reconciliation process. He anticipates the rate will decline by about 100 basis points from Q2 levels going forward. However, the fundamental driver of higher recoveries—a projected 100+ basis point increase in average commenced occupancy for the year—will ensure rates remain strong.

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CFO Mike Moss stated that the recovery rate will likely decelerate going forward. He explained that Q2 included a one-time benefit of approximately $1 million from the annual reconciliation process. The fundamental driver of the elevated rate is higher average commenced occupancy, which is now projected to increase by over 100 basis points for the full year, providing a sustained, albeit lower, benefit.

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CEO Shankh Mitra explained that a low-leverage, strong balance sheet is core to their 'handshake business' model, ensuring they can always honor commitments. He stated that the funding mix—debt, equity, asset sales, and retained cash flow—is determined by the most attractive risk-adjusted cost of capital at a given time. As conviction in growth rises, the internal cost of equity increases, which can make debt a more attractive option.

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Shankh Mitra (CEO & CIO) stated that it currently makes no economic sense to build. He explained that a 25-30% increase in RevPOR relative to operating labor costs would be needed for new construction to become viable, a level not achievable by rent growth alone in most markets.

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CEO Scott Brinker stated the space coming offline was mostly less competitive, though some directly competitive space is now being marketed for alternative uses. He estimated that cap rates for Healthpeak's quality of MOB assets are in the 6% to 7% range, while noting life science cap rates are much harder to determine.

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Joel Marcus, Founder & Executive Chairman, explained that major R&D firms seek comprehensive, amenity-rich campus environments, not isolated buildings. Hallie Kuhn, SVP of Life Science & Capital Markets, added that the specialized infrastructure needs of such tenants, like power capacity and vibration controls, necessitate a build-to-suit solution. Regarding the pipeline, Mr. Marcus stated that trends are highly specific to each submarket, making generalizations difficult.

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CFO Karen Brennan noted encouraging signs in office leasing, with the U.S. market about 80% through its downsizing cycle and activity at its highest since 2019. She expects gradual leasing growth in 2025. CEO Christian Ulbrich stated that capital allocation balances share repurchases against platform investments and M&A, with a commitment to at least offset share dilution from stock compensation.

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Executive Angela Kleiman explained that Essex has shifted to a seasonal occupancy-focused strategy for Q4. Renewal offers are being sent in the mid-4% range and are finalizing in the high-3s. Regarding Proposition 33, she expressed confidence it would be defeated, noting that only 8% of California cities have rent control, many mayors oppose the measure, and similar initiatives failed by large margins in 2018 and 2020.

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